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At Schultz Financial Management we perform active portfolio management for high net worth individuals and families with the objective of earning consistent and attractive investment returns, regardless of the economy, interest rates, or stock market behavior.
In this report you will learn about active portfolio management, and the benefits of Schultz Financial’s unique investment approach.
Contents
I. What is Active Portfolio Management? .................................................... 2
II. Our Road to Active Portfolio Management .............................................. 3
III. Our Investment Approach / Philosophy .................................................. 4
IV. Our Unique Investment Strategies .......................................................... 8
V. Creating Your Customized Portfolio ...................................................... 11
VII. How to Get Started .............................................................................. 11
VIII. Biography ............................................................................................ 13
Active portfolio management applies risk management techniques to the investing process in order to provide a smoother, more consistent, and more dependable result than buy-and-hold investing.
Investors who have accumulated a substantial nest-egg need to carefully consider how much risk they are willing to take, knowing that it may take many years to recover from a market setback. After two horrific bear markets in the last 15 years, many investors have recently questioned the wisdom of a "buy and hold" investment approach and have begun to embrace active portfolio management instead.
The theory behind buy-and-hold investing is the idea that markets are efficient and their price at any given time best reflects available information. But markets have shown that they aren't efficient, investors aren't rational, and if you buy stocks when they’re expensive and hold them, you will likely end up with disappointing results.
Historically, there have been long periods where the stock market has performed poorly, not even keeping up with inflation. This was true as recently as 1966-1982 and again from 2000-2014. Currently at about the 2000 level, the S&P 500 is still below its year 2000 peak on an inflation adjusted basis. Because of these potentially long periods of poor performance, we normally do not advocate a pure buy-and-hold investment approach for our clients.
Instead, at Schultz Financial, we engage in active portfolio management with the goal of staying mostly invested in stocks and high yield bonds during favorable market conditions, but reduce market exposure and increase cash levels when markets undergo meaningful corrections.
most of its clients’ portfolio declines to moderate levels so that by the end of
2009, their portfolios fully recovered to new highs – less than 1 year after the
market bottom. Whereas buy-and-hold investors would wait an additional four
years until 2013 to fully recover.
To this day, Schultz Financial Management continues to develop and refine its
active management techniques so we can further improve our clients’ portfolio
performance in a variety of market conditions.
III. Our Investment Approach / Philosophy
As you can see, through our use of active portfolio management, we add
significant value to our client investors beyond traditional management involving
mutual funds or ETFs.
Here are some of the ways we strive to enhance
performance and reduce risk through active
portfolio management.
1) Avoid Poor Performing Assets – Traditional
asset allocation invests in low yielding assets
such as U.S. government bonds. That’s because
a traditional approach depends primarily on
diversification to reduce portfolio risk.
However, since we use actively managed
investment strategies which can raise cash or
hedge long positions during market corrections, we do not have to rely on low
yielding assets for risk management. By employing actively managed
strategies that manage downside risk, we can make larger allocations to those
asset categories that can generate higher returns.
Investment Strategies are the building blocks that we use to create an investor portfolio. Each of our invest-ment strategies represents a specific asset category and investing style.
Tactical-Bond Tactical High Income V Good Good OK Yes²
Tactical-Bond Tact Bond Sector Rotation V Good Good OK No
STOCKS
Core-Stocks Dividend High Income V Good Good Poor Yes
Core-Stocks Quality Growth Stock Excellent OK Poor Yes
Core-Stocks Aggressive Small Cap Excellent OK Poor No
Core-Stocks Defensive Sector Stocks V Good OK Mod Poor No
Tactical-Stocks Tactical Dividend Inc. V Good OK Mod Poor Yes
Tactical-Stocks Tactical US Large Cap V Good Good Mod Poor No
Tactical-Stocks Tactical Low Vol Large Cap V Good Good OK No
Tactical-Stocks Tactical Global Excellent OK Mod Poor Yes
Tactical-Stocks Tactical Small Cap Excellent OK Mod Poor No
ALTERNATIVE
Alternative Moderate Allocation Good Excellent OK No
Alternative Market Neutral Long Short Excellent Good Excellent No
Order from Best to Worst: Excellent, Very Good, Good, OK, Moderately Poor, Poor
¹ Holds individual bonds for client investor on a case by case basis. ² Tax deferred option using a low cost variable annuity to implement the strategy.
When it comes to portfolio management, many financial advisors will only help their clients with brokerage account assets or insurance products and leave everything else up to you. However, at Schultz Financial Management, we can help you get the best overall result by evaluating your entire portfolio. This means that In addition to brokerage account assets, we will consider other assets such as employer sponsored retirement plans, company stock, variable annuities, real estate, or other investments that you may already own. For example, if you have a 401(k) plan with your current employer, we can determine what mutual fund(s) offered by your plan will work best in combination with our investment strategies. As another example, if you already own a variable annuity or variable life
insurance policy, we can manage those investment choices for you in a way that
best compliments the other assets in your overall portfolio.
Ultimately, we want to design a custom portfolio just for you. Your portfolio will be created based on your tax situation, investment objectives, risk tolerance, and also take into account any preferences you may have for specific investment strategies.
VII. How to Get Started
If you’re interested in learning more about active portfolio management and how Schultz Financial Management can help you achieve your investment objectives, please call or send us an email to schedule a free 15-minute phone meeting.
During this brief call, you will have the opportunity to give us an overview of your financial situation and we will answer any questions you may have.
If it appears that our services are a good fit for what you’re looking for, we will request additional details from you and schedule a no-cost in-person exploratory meeting.
During this meeting, we will gain a better understanding of your specific investment objectives and expectations, and we can provide you with a clear understanding of how we would design and manage a custom portfolio to fit your unique needs.
If you’re interested in learning more, we will prepare a draft investment plan and sit down with you again for a no-cost, no-obligation review of that plan.
After the plan review, should you wish to engage Schultz Financial Management, we could begin the portfolio transition process immediately.